Economy Plan to lift Russia's ranking in World Bank's Ease of Doing Business Index from 120 in 2011 to 20 in 2018

Vladimir Putin has vowed to
vault Russia 100 places up
in the World Bank’s Ease of
Doing Business table. Will
he keep his promise?
ALEXEI KVASOV
VEDOMOSTI

Vladimir Putin has set spectacularly ambitious targets
for modernizing the Russian
economy. In a prophetic
tone, he has vowed to vault
Russia from 120th to 20th
place in the World Bank’s
Ease of Doing Business
rankings by the end of his
third presidential term in
2018.
Buoyed by the first quarter growth, Putin unveiled a
multi-faceted plan to transform the Russian business
landscape within hours of
his taking office on May 7.
The plan includes creating
and modernizing 25 million
high-productivity jobs by
2020, hiking investment to
no less than 25 percent of
GDP by 2015, boosting labour productivity to a level
one-and-half times greater
than that of 2011 and raising average life expectancy
by 2018 to 74 years from the
current 70. The core of his
mission is to package Russia
as the promised land by lifting Russia's position in the
Doing Business Index from
120 in 2011 to 50 in 2015 and
20 in 2018.
Putin’s declaration shows
that almost 10 years since
the International Finance
Corporation launched the
Doing Business report, the
Russian government is finally taking its assessments
seriously. Both the creator of
the report, Simeon Djankov,
the Bulgarian Minister of
Finance, and the World

Bank, which strongly supports it, believe the report
has largely achieved its
goals of highlighting red
tape and promoting reform.
Russia has been very slow to
address these issues, but
now the country is preparing to head off in the right
direction.
Is it realistic for the country to move up 100 places in
the IFC ranking in such a
short time? When speaking
about Russia, it is important
to keep in mind several
facts. First, when the 2007
report (representing data
from 2005-2006) was released containing the first
consolidated rankings, Russia appeared in the 96th
place, so it isn’t unreasonable to think Russia could
return to the top 100. Additionally, in certain areas,
Russia’s position is already
now significantly higher
than its general 120th place
ranking. In terms of the effectiveness of procedures
related to financial insolvency, Russia holds the 60th
place; in terms of property
registration, it occupies 45th
place; and in fulfillment of
contracts Russia has risen
to 13th in the world.
Then, there are large regional variations in the ease
of businesses conditions in
Russia. In 2009, the World
Bank tried to assess the regulation of entrepreneurship
in 10 Russian cities across
four indicators: company
creation, receipt of construction permits, property
registration and foreign
trade operations. In that
year, Russia, which was represented by Moscow, came
in the 120th out of 181 in the
general rating, just like

ILIA VARLAMOV

Putin dreams a big leap forward

Vladimir Putin climbs a
wall during
his visit to a
youth camp
last year.

today. Moscow got saddled
with the dubious the distinction of being the most
difficult place in the world
in which to obtain construction permits.

If Russia were not represented by Moscow, the picture would have looked better. In all nine other cities,
approval procedures were
better than in the capital. In

Trade It can boost combined GDP of Belarus, Kazakhstan, Russia by $900 bn

Superjet’s
fate hangs in
balance
Since Sukhoi Superjet 100
crashed in Indonesia, experts
are asking whether the
disaster is bad news for the
Russian aviation industry.

A win-win journey

ALEXANDER GABUEV
RIBR

When Russia, Belarus and
Kazakhstan announced the
establishment of a customs
union in October 2007, many
analysts perceived this new
association of former Soviet
Union states as yet another
political manoeuvre by Moscow to flex its muscles in the
region. It is no secret that
Russian leader Vladimir
Putin, who once called the
disintegration of the Soviet
Union“the main geopolitical
catastrophe of the 20th century”, pines for the Soviet
glory and wishes to restore
Moscow’s prestige among its
close neighbours. However, as
soon as the customs union became operational in 2010, it
proved to be more about economics and pragmatism than
about politics.
According to the Eurasian
Development Bank, the
union’s economic integration
holds potential benefits
equivalent to 14% of GDP for
Belarus, 3.5% of GDP for Kazakhstan and 2% of GDP for
Russia between 2011 and
2030. In monetary terms, the
GDP of the three countries
should grow by $900 billion
over the next 19 years.
The customs union will
benefit not only Russia, Be-

larus and Kazakhstan, but
also Asian companies. Producers, whose goods are
transported from China to
Europe, will be the first ones

The union will
provide access to a
single market with
173 million potential
consumers.
to enjoy the advantages of the
customs union.The development of transport infrastructure in Kazakhstan, Russia
and Belarus offers exciting
overland transport opportunities – either by road or by
rail. Astana is now financing

the construction of a highway
connecting western China
and Eastern Europe. This
route will substantially cut
transit time. Thanks to the
customs union framework,
exporters will only have to
cross two borders instead of
four to transport a container
to Poland. Furthermore, customs duties have been slashed
– instead of paying all three
countries, a company will
have to pay a single customs
tariff.
Secondly, the creation of
the customs union may be
beneficial to companies catering to former Soviet Union
markets. They will gain access to a single market with
173 million potential con-

sumers instead of three separate ones. After the Eurasian
Economic Union replaces the
customs union in 2015 - Moscow, Minsk and Astana
signed the relevant agreement in 2011 - producers will
not have to resolve legislative
problems and compare legal
intricacies in Russia, Belarus
and Kazakhstan.
A major advantage for
business structures is that
they will be able to get their
subsidiaries registered in the
most lenient tax area of the
customs union – Kazakhstan.
Moreover, the companies will
enjoy the same benefits in the
markets of Russia and Kazakhstan as residents of those
countries.

Russia set to ratify WTO
documents by July 23
The Russian government has approved the
agreements for the country's accession to
the World Trade Organisation (WTO) and
sent them to the State Duma, the Russian
parliament's lower chamber, for ratification. All the necessary documents required
to become a full WTO member must be ratified by the Russian government, parliament and president by July 23, 2012. Russia spent enormous diplomatic capital for
18 years to enter the WTO, completing its
accession in December last year. The State
Duma will examine the required documents at its meeting on July 4. RIA Novosti

Putin clears visa-free
travel for APEC summit
Russia’s President Vladimir Putin has
signed a decree abolishing visas for businessmen and officials, who are scheduled
to attend the Asia-Pacific Economic Cooperation (APEC) forum in Vladivostok in
September, the Kremlin's press service reported. The APEC forum will bring together delegations from 21 countries to discuss
a slew of measures for boosting the economic growth in the region. The APEC
countries are home to 40% of the world
population and account for nearly 54% of
the global GDP. Russia has been an APEC
forum member since 1998. RIA Novosti

Multi-role transport
plane contract inked
India’s Hindustan Aeronautics Limited
(HAL) and Russia’s United Aircraft Corporation (UAC) have signed a contract to produce 205 multi-role transport aircraft
(MTA). The 15-20 tonne-class aircraft will
be supplied to the Russian Air Force (100
planes) and the Indian Air Force (45 aircraft). The remaining 60 will be exported
to third parties, the report said. Multirole
Transport Aircraft Ltd (MTAL), a Russian
firm, will also join this ambitious RussianIndian venture.The tripartite contract was
based on a Russian-Indian inter-government agreement for joint design, development and production of the aircraft on
50:50 cost-sharing basis by the joint venture partners. RIBR

Disaster WIll it affect sales?

Customs Union weaves
a new web of prosperity
Integration between Russia,
Belarus and Kazakhstan is
set to attract more investors
and unleash economic
prosperity in the region.

Moscow, the collection of all
documents for construction
on an average takes 704
days, but in Rostov-on-Don,
it takes 194, which is closer
to the average of 162 days

for countries in the Organization for Economic Cooperation and Development
(O.E.C.D.). In Moscow, the
number of procedures and
approvals for starting construction is the largest in the
world at 54; Perm, Kazan,
and Rostov require 24, 23
and 22, respectively. Among
O.E.C.D. countries, there are
15 such required procedures
and approvals.
For all its flaws, the rating
is a useful tool for improving the effectiveness of state
regulation. What the government needs to keep in
mind is that this goal should
be pursued systematically
on all fronts rather than
through half-measures in
one area at a time. The latest scientific research shows
that if a country, in the process of competing for a higher evaluation, reduces the
registration period for a
new business by 10 days, it
can count on an increase of
0.36 percentage points in
GDP growth.
Other experts see a strong
correlation between a consistently high ranking and
the state of the business climate and the depth and
quality of measures for regulating the business environment. Russia, after all,
has had success with symbolic national projects.
Given Russia’s traditionally
small institutional infrastructure, associated external effects by themselves are
so significant that they can
exert substantial influence
on the country’s development. A rating can be greatly improved once, but it is
only possible to stay on top
through tenacity and untiring incremental efforts.

NEWS IN BRIEF

The deal
boosted inter-union
trade by
over 38%
last year, the
benefits for
foreign
countries
will become
obvious over
the next two
or three
years.

caused by the pilot's mistake:
the pilot Alexander
Yablonstev performed a dangerous maneuver neglecting
the plane navigator's alert.
Still the crash will not become a decisive factor for the
ALEKSEY EKIMOVSKY
RIBR
buyers to terminate contracts
The probe into the May 9 di- in the long term, says Boris
saster had hardly begun when Bychkov from the Airclaims
Indonesia’s Kartika Airlines CIS. “Public opinion may
said it might postpone indefi- produce an impact. I can’t
nitely its order for 30 Sukhoi rule out that customers might
aircraft. Kartika was the first want additional discounts.”
company in Southeast Asia to “Airbus also had problems
buy the Superjet; it placed a during trial flights,” recalls
$951 million order in July Bychkov. “The A320 had a
2010, with the first deliveries crash,and there were troubles
with the A380. Boeing had a
expected in September.
Presently, hard contracts fire on board a Boeing-787
are still in place for the deliv- during trials, before the plane
ery of 168 jets to Russian and was supplied to Japan. The
foreign air carriers and there contracts remained in place.”
Ruslan Gusarov, editor-inare agreements of intent to
buy about 130 superjets from chief of Avia.ru, however,
carriers in Spain, the US and points out that there have
been crashes that effectively
Thailand.
“You involuntarily pay at- ended new projects.“Take the
tention to the possible causes Tu-144 crash in Le Bourget.
of the crash – engine failure, The plane never regained the
faults in the navigation and trust of foreign buyers.”
For its part, Sukhoi Civil
control systems....This is a
clear signal that they will be Aircraft will be doing its best
seeking new discounts and to deliver the contracted
concessions from the supplier. planes.“The Sukhoi brand is
This is a normal situation for famous not only for its civil
the market, especially the aircraft, but also military
Asian market, where you products,”says OlgaKayukoshould benefit from your va from the United Aircraft
business partner’s mistakes,” Corporation.“It is backed by
says Ruslan Syroedov, an ex- a 70-year reputation. The
Sukhoi Superjet 100 brand
pert in lease operations.
Meanwhile, according to a has excellent prospects and
source close to the investiga- will be able to find a firm foottion, the crash has been ing in the market.”

Kudankulam I to start
producing power soon
The trial run of the first unit (1,000 MW) of
the Kudankulam nuclear plant, that entails
loading the reactor with fuel (enriched uranium), is expected to be held soon.The trial
run would go on for 15 days, and in stages,
the reactor would reach criticality, Minister of State in the Prime Minister's OfficeV.
Narayanasamy has said. “In all probability,
we can start getting power in June itself,” he
said.The work is proceeding rapidly on the
second unit (also of 1,000 MW), and it could
be commissioned in the next few months,
he said. A formal function is likley to be organised to inaugurate the project. RIBR

Vikramaditya begins
trials in White Sea

WWW.SOLID-MSK.RU

India's Russian-built aircraft carrier Vikramaditya (also known as Admiral Gorshkov) began sea trials June 8 in the White Sea.
India had the ship refurbished at the Sevmash shipyard in northern Russia.The aircraft carrier was originally scheduled to
begin the trials May 25. The trial will last
120 days. A mixed Russian-Indian crew is
aboard the vessel, but the Indian sailors
will mainly act as observers. The Russian
commander of the ship is Captain First
Rank Igor Ryabko. After initial sea trials,
the ship will sail to the Barents Sea for exercises with military aircraft.TheVikramaditya is a Soviet-made Project 1143.4 class
aircraft carrier. It was sold to India in 2004
but will be delivered only in December
2012. The refurbishing of Gorshkov has
cost India around $2.3-billion. RIBR

BUSINESS REPORT

Business

in association with rossiyskaya gazeta, russia
Wednesday, june 13, 2012

opinion

Trend High labour and real estate costs are pushing many Moscow-based companies outside the capital

The great white-collar exodus
While Russians once
dreamed of living in Moscow,
today more executives are
migrating to regions in
search of a better life.
Maria Portnyagina

press photo

ogonyok magazine

Tatyana Gladysheva, a Muscovite, now loves her life in a small town, where her employer’s factory was relocated.

mobility at the level of supervisors is growing each year.
“Many companies are leaving Moscow to save on administrative costs, and the
employees are forced to mi-

The traditional
rule "the closer
to Moscow the
better" is becoming
obsolete.
grate along with the business,”said Natalya Grishakova, a department head at
Malakut HR Research and
Solutions.
“The process of industrial

relocate some of their divisions outside the city, and
have new vacancies. Third,
there is the reassignment of
Moscow-based executives to
regional subsidiaries to
boost performance and do
onsite employee training.
“Companies benefit from
moving their offices out of
M o s c o w,” s ay s Ye l e n a
Chernenko.“That’s because
it’s better to have management located nearby the production facilities, so that the
supervisors have at least
some understanding of what
they are supervising: it’s sufficient to leave just a showroom in the capital, a place
where customers can see

companies moving out of
Moscow began a long time
ago, and it makes sense to relocate the administrative divisions closer to the production units,”says expertYelena
Chernenko, director of the
Consulting Center at the
Russian Academy of the National Economy and State
Service.“To achieve effective
management in the regions,
you need qualified managers, so Moscow’s oversaturation with executive personnel is gradually declining.”
There are businesses that
themselves move and bring
their employees with them.
Also, there are some Moscow-based companies that

samples of the products, and
that can be a staging ground
for participating in industry
shows.”
Nearly all major and medium-sized Moscow companies

Relocation of
companies from
Moscow also makes
the regions more
attractive.
have relocated some divisions
outside the capital. In Tver
alone, with a population of
just over 400,000, 14 call centers of Moscow-based companies have been opened,

elena krovvidi
ribr

From the 1998 financial crisis through the relative
growth and stability of 2000s
and the recent recession that
gripped the world, the Russian pharma market has
been through thick and thin,
and is set to grow, says Sandeep Nasa of Unique Pharmaceutical Laboratories.
Having studied and worked
in the Indian pharmaceutical industry for a while before moving to Russia, Nasa,
the company's LLC general
director in Russia, Ukraine
& CIS countries, is intimately familiar with the peculiarities of both Indian and Russian pharma markets.
In Russia the medicines distribution system is more centralised than in India, where
every state has its own system,
which makes distribution in
Russia easier to a certain extent, says Nasa. He started
working in Russia in 1995 as
director of the Unique's division in 1998, just a month

ahead of the severe financial
crisis that shook Russia.“Of
course, it was a tough time,
with Russian ruble devaluating, with empty stores and
people who lost their life-long
savings overnight,” he recalls
of those grim days.
But selling pharma products is not exactly a piece of
cake in the Russia of 2000s.
“Some Indians still have this
image of Russia as a country
where there’s deficit of goods
and people don’t have much
choice what to buy,”says Nasa.
“You see there was this time
when a person went to the
pharmacy and asked for a
medicine and it was given to
the customer through a window. Nowadays customers attentively read the labels, they
can check all the necessary information on the chemical
content of a medicine.”On the
contrary, Nasa points out, one
has to work really hard to promote and sell one’s product to
Russians because,with a wide
array of goods in the market,
one has to be competitive to
make it big here. He has a few

words of advice for Indians
wishing to engage in the pharma industry in Russia."Be patient," he says, adding that
Russia is not the place where
things are done quickly. “You
have to think in a long-term
perspective in Russia,” cautions Nasa. “If you set an enterprise in Russia, don’t expect immediate profit,in some
cases it just won’t happen in
the next 2 or 3 years, you’ll
have to wait.”
Nasa believes that the Russian government is going to
pour more money in health
sphere in the near time. The
Russian government is steadily hiking spending on the
medical sector. However, it
hasn’t yet reached the level
like that in the UK when cuts
are needed. So the tendency
for the years to come is the
government’s support of the
pharma industry, which in
turn is going to attract more
interest from foreign investors.
A natural optimist, Nasa
says that Indian entrepreneurs entering the Russian

shutterstock/legion-media

industry is booming, middle class is growing

Specially for RIBR

T

he reaction to the
new Russian government has ranged
from neutral to negative. Perennial hopes that
Russia would finally launch
a radical and rapid package of economic reform
and political liberalisation
failed yet again to materialise – but this was no
real surprise. The Kremlin
doesn’t do anything radical. Business leaders
praised the stability that
the new cabinet brings. For
most existing investors,
continuity is important.
They have learned how to
operate in this environment and don’t want radical changes.
Nevertheless, a couple of
appointments have attracted upbeat commentary.
The promotion of former
presidential economic advisor Arkady Dvorkovich
to the post of deputy prime
minister for industrial and
energy policy is seen as a
big step forward for the
liberal camp, as Dvorkovich, like his former boss
German Gref, only talks
sense.
One surprise was the appointment of Alexander
Novak to oversee the energy portfolio. At the same
time, the move of Igor
Sechin, who formerly oversaw the energy portfolio,
from the government to
Rosneftgaz, the holding
company that owns the
state’s stake in oil major
Rosneft, has led some to
speculate that Sechin will
de facto be in charge of energy.
However, all this talk of

Business praised
the stability the new
cabinet brings. For
investors, continuity
is important.
icy will be about collecting
taxes from the natural resource sector.
This theory is bolstered by
the appointment of Andrei
Belousov as minister for economic development. A wellrespected economist, Belousov is close to Putin and
supports the president’s
preference for big state
spending.
In other words, the plan
seems to be to make money
off oil to spend on big state
initiatives.
Overall, observers can expect more of the last decade.
Steady progress toward reform, but nothing to make
banner headlines and plenty
of mistakes in implementation.

SCO poised to play
bigger Afghan role
The 12th SCO summit in
Beijing saw India seeking a
bigger role and Afghanistan
inching to the centre of the
regional body's agenda.

Vital statistics

press photo

Indian companies, take note: Russian Pharma

each of which can employ
over 1,000 people.“This is one
of the most widespread types
of business migration to the
regions,” said Natalya
Zubarevich from the Independent Institute for Social
Policy.“The process makes
obvious sense: labor costs and
office rentals are cheaper outside of Moscow. The result is
that our call centers are in
Tver and our ‘offshore’ programming is done in Nizhny
Novgorod orVoronezh.”
The relocation of companies from the capital to the regions also makes the regions
more attractive. Says Gladysheva: "A lot of jobs have
opened up, people are staying
in their jobs, there are new
prospects for career growth,
and the communications and
road infrastructure have improved.”
There’s another trump card
that enhances the attractiveness of the Moscow suburbs:
easier housing solutions.
“When we had our office in
Moscow, a lot of our executives and managers were renting,”says Oxana Rogova, an
employee of the kitchen furnishings company Blum.
“After 2007, when we moved
to the Domodedovo district,
they could buy their own
apartments in the Moscow
suburbs.”
Experts predict that for
major holding companies, investing in their own executives’ mobility will pay off
handsomely. “That’s why
white-collar employees from
major companies are running
around the country like gypsies,”says Natalya Zubarevich.“They will be doing onsite
personnel training as long as
the regions still experience a
shortage of skilled employees.”

power is to miss the point of
Vladimir Putin’s government. In BorisYeltsin’s day,
running the Kremlin was all
about power, but under
Putin, Russian politics is increasingly about policy.
Power still counts for a lot,
it makes more sense to look
at what sort of policy changes the new government will
pursue to get a sense of
where Russia is heading.
Take the Dvorkovich-Novak-Sechin triangle. Sechin
will clearly be responsible
for operational issues pertaining to developing the
sector as Novak is not an oil
man, but comes from the finance ministry.
Put together, what this
means is that the energy pol-

Geopolitics India strongly pitches for full membership

Interview sandeep NASA

Think long-term
to make it big

Ben
Aris

Sandeep Nasa, Unique Pharmaceutical Laboratories.

pharma market should be encouraged by recent trends.
The Russian pharma industry
is showing double digit
growth, the middle class is
growing, and the customers
are becoming more demanding.
The pharma entrepreneur
feels that there are no particular difficulties in conducting
pharma business in Russia.
"There is some bureaucratic
hurdle but if you understand
the market properly it can be
overcome”.Product registration can take two to three
years but then in India it also

The number of foreign drugs
in the Russian pharma market
amounts to 70%, but Russia's
Ministry of Industry and Trade
sets an ambitious goal to increase domestic drug production up to 40%. After Russia's
official accession to the WTO,
the customs duties imposed
on medicines are expected to
drop (from 15% to 5-6.5%).

takes time. As for sizable tax
holidays in some Indian states,
in Russia the situation is different but there are certain
tax holidays there as well.
Taking a long-range view,
Nasa underlines that the
rapid growth of the pharma
industry in Russia is aimed at
increasing the share of the
Russian medicines in the market. Nasa advises would-be
entrepreneurs not to neglect
the regions as Moscow and
Saint-Petersburg accounts
for only about 30% share of
the market, with the region
cornering a hefty 70% share.

Manish chand

specially for riBR

The leaders of the six-nation
Shanghai Cooperation Organisation ended their 12th
summit in Beijing on June 7
with an ambitious mid-term
plan mapping the mid-term
future of this influential organistion over the next decade.The summit culminated
in the signing of ten pacts, including an all-encompassing
declaration on “Building a
Region with Lasting Peace
and Common Prosperity,”
and a revised SCO strategy
for enhanced counter-terror
cooperation.
The expansion of the
grouping loomed large on
the agenda of the two-day
summit, with the SCO granting Afghanistan an observer
status and accepting Turkey
as a dialogue partner. However, the observers like India
wanting to get inside the
SCO tent will have to wait
for some more time as the
procedures for admitting
new members are elaborate
and rigorous. At the summit,
India’s External Affairs Min-

Photoshot/Vostock-photo

It’s 9:00 a.m. rush hour, but
Tatyana Gladysheva is not
rattled as she used to be in
Moscow. It now takes her
only five minutes to get to
work.And in the evening, she
goes for a stroll in the woods
to get some fresh air.
Indeed, life has changed
dramatically for Gladysheva
ever since she shifted to the
Vladimir region three years
ago after her employer, the
Bolshevik Candy Factory, relocated from Moscow,and she
moved with it. With Gladysheva’s professional skills,she
could have remained in Moscow and found work at another company, but she opted
for a new kind of life.
“And I don’t regret it! Of
course, senior management
helped: they offered me an interesting position, plus they
provided housing, plus travel
expenses in case I want to visit
Moscow,”says Gladysheva.
She is not a freak exception. Human resources analysts say that a new trend is
shaping up: the flow of office
employees beyond the Moscow Beltway.The traditional
golden rule of white-collar
employment,“the closer to
Moscow, the better,”is rapidly
becoming obsolete. In 2006,
according to surveys done by
the recruiting portal Superjob.ru, only 15% of Muscovites would have been willing
to move to a new city for a
new job; but in May 2012, 24
% of upper and middle management people say they
wouldn’t mind moving. This

Putin’s new cabinet :
More of the same

SCO leaders held their 12th
summit on June 6-7.

ister S.M. Krishna made a
strong pitch for “larger and
more constructive role” in
the SCO as a full-fledged
member and highlighted
myriad strengths India could
bring to this Central Asia-focused grouping. Russia has
vigorously backed India’s
membership and feels that
India’s presence could be a
game-changer for the SCO.
China has welcomed New
Delhi’s likely inclusion, but
made it clear that the prospective members will have
to work harder to get in.
Above all, the Beijing summit saw Afghanistan climbing on top of the agenda. Rus-

sian PresidentVladimir Putin
and his Chinese President Hu
Jintao also held separate bilateral talks with Afghan
President Hamid Karzai and
offered greater security and
economic assistance to Afghanistan. Karzai sought
more funds and exhorted the
SCO leaders to be more proactive in the wake of the withdrawal of the US-led Nato
forces from his country. India,
which has pledged $2 billion
for reconstruction of Afghanistan, welcomed the SCO’s
role as“a promising alternative regional platform to discuss the rapidly changing Afghan situation.”
The dangerous mix of Islamist militant networks
and narcotics trade in the region are key factors driving
the SCO to take a larger role
in stabilising Afghanistan.
As the SCO enters the second decade amid a mutating
international order, the
world will be watching how
its expansion will affect the
regional dynamics and provide a counterpoint to the
West-dictated narratives on
key international issues.
Manish Chand is Senior
Editor with IANS and a
New Delhi-based writer on
international affairs.

BUSINESS REPORT

Space

in association with rossiyskaya gazeta, russia
Wednesday, june 13, 2012

High-tech Siberian city has bounced back from the nightmare 90s; graduates from top aviation universities are trooping in large numbers

Glonass spurs rebirth of space hub
The Glonass has infused a
new life and vitality into the
Siberian city Zheleznogorsk,
which is now attracting
droves of young specialists.
elena shipilova

Soviet romanticism
“In the 1960s, the whole
USSR dreamed of space! It
was an honour to work in the
industry,” says Vladimir
Khalimanovich, director of
the Industry Centre of the
M.F. Reshetnev Information
Satellite Systems company
(ISS). He came to
Zheleznogorsk 47 years ago
from Kazan when only the
best and the brightest were
recruited to closed cities,
home to secret military establishments. Life in such a
city meant living with a few
restrictions: if you wanted to
invite relatives or friends to
visit, you had to get special
permission from the security

The Russian GLONASS satellite navigation systems are giving a tough competition to the American GPS systems.

service. But its attractions
outweighed many irritations: Zheleznogorsk, for example, received centralised

The city only revived
after the Russian
government began
investing in Glonass
navigation system.
supplies of various goods,
which it was impossible to
obtain in ordinary cities in
the USSR.
In the 1990s, the city fell
on hard times. The centralised supplies of foodstuffs
ceased, and people were

tough competition to the
American GPS. The state
now provides two-thirds of
20 billion roubles that make
up the ISS’s annual turnover,
with the rest coming from
commercial orders.

plunged literally overnight
into brutal realities of capitalism. Like the majority of
Russian enterprises, ISS,
around which the city’s life
revolved, lost the lion’s share
of its financing. Subsequently, the factory’s workforce of
more than 8,000 people was
almost halved, triggering an
exodus to big cities. The engineers were only able to
breathe easily at the start of
the new century, when the
government began to invest
funds in the creation of the
GLONASS satellite navigation system as a part of the
space programme. A year
ago, the system’s 24 satellites
became operational, giving a

Realities of capitalism
Unfortunately, in those
days, the ISS got so caught
up with its internal issues
that the Russians were almost 20 years behind, and
the Americans took over the
lead in building satellite systems, once considered the
forte of the Soviet Union. It
was only in 2008 that the ISS
started getting international
orders. First, the Israeli op-

erator Space-Communication Ltd ordered the AMOS5 satellite, then in 2009, the
Indonesian company PT
Telekomunikasi Indonesia
Tbk bought the Telcom-3
telecommunications system,
and later contracts were
signed with Ukraine and
Kazakhstan.“Every year, we
take part in four or five tenders, of which we win one.
One international contract
per year is enough for us.
That’s all we can handle at
the moment,” says Khalimanovich. Today, about 40
satellites are in production,
including secret military
systems, Glonass satellites,
and telecommunications

Skolkovo is upbeat about Russia's prospects

What prevents Russia from
hiking its share of the world
space markets?
The state financing of
space activities in Russia has
more than trebled over the
last five years and is growing.
However, there is virtually
no private sector in the industry, whereas the global
trend is an increasingly confident involvement of the private sector in space exploration. In this area, Russia
should not hesitate to form
alliances with leading world
producers.

Do you think that people will
prefer to holiday in orbit rather on sandy beaches?
The case of Virgin Galactic, which has received payments from several hundred
people for a future sub-orbital flight, shows that the
space tourism market has a
future. Many are prepared to
pay hundreds of thousands
of dollars to experience
weightlessness and see the
Earth from outside. When
technologies become fairly
safe and cheap, such travel
could become fashionable.
Russia is only planning to
enter that market, but we
have other promising projects.The Glonass system was

dentally, the ISS has retained
the original Soviet training
system for young specialists.
After their fourth year in an
institute, students come to
the company and work for
two years in various roles
and gain experience, and

finally put together last year.
This is the second navigation
system in the world.The first
(GPS) was made by the
Americans. The Skolkovo
Foundation today supports
several navigation-related
projects. This is the path towards the commercialisation of Glonass.
Any domestic “breakthrough
products” on the way?
Russian energy and engine
technologies like rocket engines and space nuclear
plants have a good chance. I
do not rule some less spectacular but important technical solutions in the field of
small space platforms and
elements of on-board service
systems. The members of the
Skolkovo project are working on such projects.
Who else is supporting private
initiatives?
Indeed, other development
institutions began to support
the commercial industry before we did. They include the
Russian Venture Company
and Rosnano.Vnesheconombank is actively investing in
major projects.
Are Russian businesses lukewarm about space industry?
We have hardly any law on
commercial space activities.
Private interests simply do
not understand what rules to
play by and businessmen are

olga ivanova
riBR

kommersant

Has the role of outer space in
the global arena increased?
Indeed, the world economy is becoming more dependent on the intensity of space
activities. The market for
space technology production
and services is around $300
and 400 billion a year. It has
several segments, the biggest
being satellite communications and telecommunications (over $100 billion), navigation and distance Earth
sensing. Russia’s share in
these segments is less than
one per cent. In the production of satellites, our share is
7–10%. Our share is traditionally high – 33–40% – in
orbiting payloads, but that
segment is small, about $3
billion a year.

It was only in 2008
that the ISS started
getting international
orders. One contract
per year is enough.

only after that do they defend their diploma.“ISS is an
excellent place for training
staff. If we could, we would
buy up most of its specialists,” says the manager of a
Moscow company.
The glory days of the past
are still a long way, but the
“new blood” has started to
breathe new life into the city.
A new housing estate has
been built, where employees
can buy a flat through a preferential mortgage system.
“The company covers half
the interest,” says ISS staff
Kristina Uspenskaya. But
people rue the dearth of cafes,
cinemas and restaurants in
this city of 100,000 people.

A new lunar race has
emerged. Russia, India, US
and other major space
powers are eying the first
manned flight to the moon.

The chief of the Space Technology at

riBr

starting out is $1,000, while
a graduate from a technical
university can only hope to
earn half that much. Inci-

and geodesy satellites for
Russian operators, the Russian Satellite Communications Company, the federal
state unitary enterprise and
Gazprom Space Systems.
The staff numbers have
bounced back, with the place
becoming a magnet for
young specialists. In 2005,
there were 5,000 people
working at the ISS, but now
there are 8,500. Graduates
from the aviation universities in Kazan, Tomsk and
even Moscow are again being
drawn to Zheleznogorsk, but
this time it’s not romanticism
that’s attracting them but
money. The fact is that the
pay here for an engineer just

Moon sparks a
new power play

Battle hots up for
share of space pie
Does the private sector account for the US’ dominance
in world space activities?
If one combines the US’civilian and military budgets,
the sum will exceed the total
spending by the rest of the
world on space activities.
The US policy adheres to a
strict“division of responsibility”: the study of the solar
system, including planets
and asteroids, is the business
of the state, whereas developing near-Earth space is
the domain of private companies.The giant contractors
of the US space agency, be it
Boeing, Lockheed Martin or
Orbital, are all private enterprises .They ensure America’s technological lead.

Vladimir Khalimanovich, ISS Industry Centre director.

Vision Russia, India team up in Chandrayaan 2 mission

Interview
Sergei Zhukov

elena shipilova

It costs approximately $150
million to build one satellite,
plus $50 million– the launch
cost plus 20% – for insurance.
One small error means blowing up millions of dollars into
space, literally. A huge number of tests are, therefore,
done at each stage of construction. One of the most
spectacular is the trial unfurling of the wings, i.e. the solar
batteries of the finished satellite. “The preparations can
take many days. Operations
begin only when the staff has
checked everything ten times
and put signatures on various
documents and the client’s
representatives have switched
on their video cameras for
the minutes,” says Sergei Apenko, chief designer for electrical testing and electrical
design. And so the system is
launched.

Profile

Who is Zhukov?
AGE: 55
education: PhD in engineering sciences

Sergei Zhukov is Executive Director of the space technologies and telecommunications
cluster at the Skolkovo Innovation Center. He was born on
September 8, 1956 in the city
of Zhezkazgan, Kazakhstan. In
1979, Zhukov graudated from
the Bauman Moscow State
Technical University with dis-

afraid to invest in the sector.
There are many restrictions
on obtaining licences for
space activities.
Is Skolkovo helping attract
private capital into space exploration?
Our strategic goal is to attract scientists, engineers,
industrialists and entrepreneurs from various countries.
Do you think that we can mine
minerals on the Moon?

tinction majoring in "nuclear
power systems". Zhukov has
PhD in engineering sciences.
Zhukov was in-charge of the
astrophysics and radiobiology experiments on board
the Mir orbital space station.
He took part in foundation of
the Federal State Unitary Enterprise "Russian technologies" in 1997 and "Vostochny"
spaceport in 2007. Zhukov is
test pilot, member of Russian
Space Academy and President of the Moscow space
club public association.

So far, this is sci-fi stuff
but I do not rule out that it
might happen in a few decades. There is water, manganese and aluminium on
the Moon and asteroids that
are fit for making fuel and
structural elements of spaceships and long-term stations.
American business has plans
to develop rare earth elements and deliver them to
Earth.The world space business is developing rapidly
and we shall just have to wait
for the outcome.

The race for lunar exploration has acquired a new
momentum. Leading space
powers, including Russia,
the US, India, China and the
European countries, are harnessing their best talents and
technologies to score new
milestones in this ongoing
journey.
Russia has its Luna Glob
(currently split into two separate orbital and landing
missions) and Luna Resurs,
which is being done in collaboration with India’s
Chandrayaan 2 mission.
Currently, there are three
NASA missions orbiting the
Moon (GRAIL, ARTEMIS
and LRO), with the next
American lunar mission
LADEE (Lunar Atmosphere
and Dust Environment Explorer) scheduled for launch
in May 2013. And then there
is the Chinese Chang’e 3,
which incorporates a lander
and a rover. Europe is lagging behind the leaders, as
there are no missions presently under development.
The private sector may join
the space sweepstakes as the
Lunar Google X Prize is announced for the team to send
a robotic rover to the Moon
before the end of 2015.
The first stage of the Russian new lunar programme
will begin in 2015, with the
launch of the Luna-Resurs
and Luna-Glob probes. Both
are similar in design and will
study south and north poles
of the moon respectively.

shutterstock/legion-media

In the depths of the Siberian taiga, on the bank of the
river Yenisei stands the
closed city of Zheleznogorsk,
surrounded by a barbed wire
fence.You can’t just go and
live there if you want to, and
the local residents are only
allowed to travel home if
they have a pass, and even
then they have to undergo a
full check first. Once inside
the city, it’s like travelling
back in time to the USSR of
the 1950s and 1960s: there
are wide avenues flanked by
five-storey blocks of flats
painted in different colours.
In the centre stands the Rodina [Motherland] cinema, and
the main entrance to the factory, which built the famous
Kosmos and Molniya satellites, the most powerful of
their time.

ruslan sukhushin

riBr

ruslan sukhushin

A $200 million
gamble!

The idea of going to the “seventh continent” is still alive.

After 2020, a new stage is
scheduled with two bigger
rovers planned for delivery.
Their missions may last as
long as five years, with rovers
scouting the area as far as 30
km far from their landing
spots.The data obtained will
be used along with high-precision topographic maps of
the Moon while the data on

The Moon is once
again turning into
an arena for political
and possibly even
cultural rivalry.
its composition will help understand the question of the
Moon’s creation, its inner
structure, and its response to
the gravitational pull of the
Earth. Eventually, scientists
hope to find the evidence on
the size and composition of
the Moon’s core, and the history of its crust.
An accurate gravitational
map would also help to study
hidden mass concentrations

that distort gravitational
fields. The data provides insight into the history of the
Moon – apart from giving details on the Moon’s surface,
which are crucial for further
exploration of the body.
While actual activities on the
lunar base building might
seem dormant, the idea of
going to the“seventh continent”is still alive.
The missions, set to materialise before the 2020s, are
expected to contribute to the
preparation for a manned
Moon flight by 2025 or later.
It may seem like a new Moon
race, even though it is far less
heated than its predecessor
back in 1960s. The Moon
once again is turning into an
arena for political and possibly even cultural rivalry.
While old space powers –
namely the US, Europe, and
Russia – talk of long-term
goals for a lunar base and
thorough preparation for a
lunar human flight, new
players on the field like
China or Iran are going to
struggle to find their way.

BUSINESS REPORT

Sport

in association with rossiyskaya gazeta, russia
Wednesday, JUNE 13, 2012

Football Veteran coach Dick Advocaat eyes the final, says team is on an upswing

Basketball High hopes for Russia at London Olympics

Russia flies high, moves AK-47 never
misses a shot!
closer to Euro glory
Russia seems confident
about its chances at Euro
2012. Coach Dick Advocaat
has his eyes firmly set on
making it to the finals.
tino kunzel

football, which was exhilarating to watch when the
Russians were in form. The
team around Zenit St Petersburg superstar Andrei
Arshavin was all but out of
the 2008 tournament until
Croatia miraculously gave
the Russians some help by
beating England in the final
match – the day of qualification that secured Russia’s
passage and kept England
home. Such fortunes made
believers out of the Russians, who now considered
Hiddink to be their lucky
rabbit’s foot.
In 2008, the Russians improved with each passing
game and defeated the favourite Netherlands in the
quarter finals 3-1 after extra
time. The hype soon followed. Russia delivered a
better brand of“Dutch”football – fleet of foot, imagina-

tive and full of pressing. A
stunned Europe described
the Russians as the discovery of the tournament. Back
home, hundreds of thousands took to the streets in

We'll see if Arshavin
generation's
experience prevail
over youthful energy
of other teams.
metropolitan and rural areas
at around midnight, delirious with joy.
Two days after defeating
the Dutch, the Russians were
outmatched by Spain, losing
3-0 in the semi-final. A sobering result to be certain,
but the Russian faithfuls
were forgiving after experiencing such brilliance on the
pitch. The team built off its

strong European showing in
the World Cup qualifying
campaign that followed
shortly thereafter. Everything seemed to be on track,
until a home loss to Germany
in the autumn of 2009 derailed the Russians.
The hype died as quickly
as it had started. And all of a
sudden, Hiddink wanted to
spend more time at home
than in Russia. Shortly thereafter, the two parted ways,
paving the way for Advocaat
to take over. Advocaat was
no stranger to success in
Russia after leading Zenit St
Petersburg to glory in the
domestic campaign and in
the UEFA Cup as well and
even dispatched Bayern Munich 4-0 in the semi-final.
Advocaat de-emotionalised international football.
The only measure of his success would be whether or not

Pavel Petrovsky
riBr

Russia’s hopes for reviving
basketball glory rest on the
shoulders of the 31-year-old
Andrei Kirilenko, better
known as AK-47 for his finesse and precision in the
game. He is now bracing for
the tough fight at the London
Olympics,and is upbeat about
putting Russia back on the
global basketball map.“In my
opinion, Russia is strong
enough to make it to London
and to fight for the medals
there,” he says confidently.
Clearly, Kirilenko’s formidable skills are Russia’s best
bet at the London show. The
history of Russia’s national
team is inseparably linked to
the career of Kirilenko. He
was born on February 18,
1981 in Izhevsk, but now he
holds the double citizenship
of Russia and the US.
Kirilenko became the
youngest player in the history
of Russian basketball championships – he played his first
game for Spartak St. Petersburg at the age of 15. After
spending two years with
Spartak (1996-1998),Kirilenko played for CSKA Moscow
(1998-2001). In 1999, he became the first Russian to be
picked in the first round of an
NBA draft. He was selected
by the Utah Jazz. In 2007, he
helped the Russian national
team beat Spain in the EuroBasket 2007 final and
earned MVP honors. At the
2008 Beijing Olympics, Kirilenko earned the right to
carry the Russian flag at the
opening ceremony of the
Games.“Being in the mind of
the whole country, representing a Russian team full of

stars is a great
feeling. I felt
touched,
amazed and inspired,”recalls
the Russian
basketball star.
After the Beijing Olympics,
Kirilenko left
for the NBA. He
played in the US
until the last season, when he had
to get back home
because of the lockout. Since 2011, Kirilenko has been with
CSKA Moscow.
Kirilenko’s flair and
optimism are reminiscent of glory days of the
Soviet Union’s basketball prowess.The Soviet
Olympic basketball
team defeated the
U.S.in a last-second win in Munich in 1972, and
at the 1988 Seoul
games, the Soviet
team led by Alexander Gomelski defeated the
U.S. machine in the semifinals.The Soviet Union team
won eight European championship titles in a row from
1957 to 1971. While the Russian national team is heir to
the Soviet basketball glory, it
has yet to produce any outstanding results.The Russians
won the silver at the world
championships in 1994 and
1998 and won their first gold
– at the European champion-

itar-tass

Russia is excited about its
prospects at Euro 2012. The
buzz has only got louder
after a dazzling friendly 3-1
win against Italy in Zurich
on June 1, marking the first
post-Soviet win over Rome.
The Euro 2008 semi-finalists
are now itching for more.
Russia’s ace coach Dick Advocaat can barely hide his
sense of triumph.“We are on
an upswing. We are improving from game to game,”said
a jubilant Advocaat.
The Euro 2008 semi-finalists have set the bar high.Advocaat made an ambitious
announcement in Moscow
that the goal for Euro 2012 is
to make it to the finals.
Reaching that goal would
not be that far-fetched. Russia did come third in the 2008
tournament, after all. However, making it to the finals
would not only mean living
up to its billing as a top favourite in a group with Poland, Greece and the Czech
Republic, but also getting
through traditional powerhouses like Germany and
Spain.
The road to the finals may
not be very long, but it sure
isn't paved with roses. Experts consider that a long
shot at best for the Russians.
Not even the legendary
trainer like Advocaat can
make that big difference in
the eyes of the odds makers.
T h e D u t ch m a n t o o k
charge two years ago after
fellow countryman Guus
Hiddink orchestrated a
fresh brand of attacking

his team qualified for the
Euros. The campaign was a
roaring success as Russia
won its group with Ireland,
Armenia and Slovakia easily. Russia scored 17 goals in
10 matches, exactly half as
many goals as Germany in
its group. Both the coaching
staff and team alike became
increasingly annoyed at the
criticism directed at the
team’s minimalistic ways.
Instead of euphoria before
the Euros, “selfish” and
“moody” were the terms
bandied about and team performances were said to be
influenced by emotion.
The veteran coach then
continued handling things in
his own unique way. He did
not present his preliminary
roster for the Euros himself,
but simply turned it into the
Russian Football Federation.
T h e ro s t e r h a s h a rd ly
changed since 2008 except
for Zenit duo Aleksandr
Kerzhakov and Igor Denisov.
Four of the five players that
started playing abroad after
the Euro 2008 have since returned to Russia. Arshavin
(31/Arsenal), Roman Pavlyuchenko (30/Tottenham
Hotspur),Yury Zhirkov (28/
Chelsea) and Diniyar Bilyaletdinov (27/Everton) were
all relegated to the bench
with their English clubs,
while Pavel Pogrebnyak (28)
has recently moved fromVfB
Stuttgart to Premier League
outfit Fulham.
The average age of the
Russian team is approximately 28.34 years old, which
is just slihgtly younger than
that of the Irish squad (28.35)
and much older than the
youngest team Germany
(24.52). The Euros will show
if Arshavin generation's experience prevails over youthful energy of other teams.

Andrei Kirilenko, better
known as AK-47, is
confident of reviving the
Soviet basketball glory at
London Olympics.

ships – only in 2007.
The Russians easily
beat Iran in the first game of
the 2008 Beijing Olympic
tournament, but were then
defeated by Croatia, Lithuania, Australia and Argentina.
Russia finished fifth and did
not make it to the next
round.
Russia's fortunes could,
however, change dramatically at the London Olympics if
Kirilenko’s confidence is anything to go by.

Culture With Russia's economy growing and greater bilateral trade, more career opportunities await Indian students as translators, teachers

Introducing Mumbai to perks of learning Russian
Indians are rediscovering
the pleasures and profits of
learning Russian, with the
University of Mumbai
showing the way.
ajay kamalakaran
specially for ribr

When Russian language
scholar Laxmi Mikaelyan
joined the faculty of the department of Russian at the
University of Mumbai in
1998, she was shocked to see
that just one student had enrolled for the course. Those
were the days when the Russian economy tanked after
the country defaulted on its
debt and the rouble crashed.
“The demand for Russian
had fallen for various reasons such as the collapse of
the Soviet Union,” says Mikaelyan, a doctorate in philology from the Academy of
Sciences in Moscow.“Interest
in Russian is now picking up
as many people realise that it
is the link language between
all the former republics of
the USSR.”
At the end of the present
academic year, over 30 stu-

dents have obtained certificates, diplomas and degrees
from the university. From
part-time weekend courses
that begin from the basics to
a Master of Arts programme
covering topics such as literature, lexicology and translation, the university has several options for those looking
for proficiency in Russian.
“The five-year integrated
programme in Russian offered by the department is a
full time Bachelors plus
Masters course which makes
you good in Russian,” says
Mikaelyan, the head of the
department.“It is a ‘loaded’
course, so to say: it gives
about 600 contact hours annually in Russian!”
The Russian government
is also looking at actively
promoting the language
through the university.“The
Russian Consulate in Mumbai announced a one-month
scholarship for two of our
full-time students in either
Moscow or St Petersburg
that will commence next
year,”says Mikaelyan.
Russian is at a distinct dis-

Dhanashree Ojale, Russian language student.

advantage in India’s financial capital as there are no
schools offering the language
as a third option. Several
schools in the city offer
French and German and
many others even offer Japanese.“We actually take them
from zero level to where they
can read the original works
of great masters like Chekh ov, To l s t oy a n d D o s toyevsky,” says Mikaelyan.
The courses at the university
go beyond pure academics

and students are encouraged
to take part in programmes
organised by the Russian
Centre for Science and Culture in Mumbai.“We try to
give them a window to Russia,”Mikaelyan adds.“Classroom interaction in Russian
plus language practiced outside - among the students, or
with the teachers, or with
native speakers of Russian ensure excellent fluency in
the first few years of this programme."

The part-time students
have varied reasons for
learning the language: some
professionals and businessmen are looking at the large
Russian market, others want
to get an understanding of
“enigmatic Russia” as one
student put it. Another student, who didn’t want to be
named, admitted that he
needed Russian for the dating sites that he uses.
Full-time students like
Vivek Chandanshiv are looking for a career in the Russian language.“I’d like to either be a translator or a
teacher,”says Chandanshiv,
who wants to travel on the
Trans-Siberian Railway and
explore the beauty and
splendour of Russia. His
classmate Dhanashree Ojale
swears by the works of
Maxim Gorky.“The grammar is confusing and intricate but I love the language,”
says Ojale, who is fascinated
by St. Petersburg. Both students have been short-listed
for the scholarship in Russia
and completed 1500 academic hours over three years

to earn their Bachelors degree in the language.
The university screens
Russian and old Soviet films
for the students and also encourages them to use Russian social networking sites.
Although a few Russians
come every year as visiting
lecturers at the university,
Mikaelyan is eager for greater interaction between the
University of Mumbai and
Russian universities.“There
has been a memorandum of
understanding between the
University of Mumbai and
St Petersburg State University on academic exchanges,
which should commence
soon,” says Mikaelyan. She
feels that the Russian expat
community in the city and
the academia in Russia can
help students learn the Russian language and culture.
Promoting language overseas is also a part of the Russian government’s strategy
of enhancing its soft power.
This year, the University of
Mumbai held a “Day of the
Russian Language”, where
the Russian Consul General

Europeans
To buy Iran’s
and
oil,
Indians
or not–todivided
buy, that’s
or united
the
by
question…
DNA?
Rakesh
M.K.
Krishnan
Bhadrakumar
Simha

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the quote

Laxmi
Mikaelyan
PhD in philology, Academy of Sciences in Moscow

"

The demand for the Russian language had fallen
after the collapse of the
Soviet Union. But now interest
is picking up as many people
realise that it is the link language between all the former
republics of the USSR.

Aleksey Novikov spoke of
plans to open a Russian language school in the city. Novikov called on the university to support the first

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initiative of this kind in India’s financial hub.“The possibilities for the Russian language are endless,” says
Naresh Srivastav, an alumnus of the university, whose
business dealings with Russia cover hospitality and
pharmaceuticals. Specialised vocational training by
the university and dedicated
schools, says Srivastav, can
fill in many vacancies for
businesses that are catering
to Russians in India.
The university is expecting a sharp rise in enrolments for the 5-year integrated Russian course in the
new academic year. While
Russian may still not have
the allure of French or German in Mumbai, the opportunities generated by Russia’s growing economy
should encourage more
young people to specialise in
Russian language studies.
“Career opportunities knock
on the doors of people who
take the best out of the integrated programme and gain
the competitive edge,”says a
confident Mikaelyan.